Telecom Italia approves fixed-line network spin-off plan

Telecom Italia said its board has approved the plan to spin off the operator's fixed-line network into a separate entity, in what is being described as a landmark deal to raise funds for the debt-ridden company.

In a statement after its board meeting on Thursday, the Italian operator said talks are continuing with state-backed fund Cassa Depositi e Prestiti (CDP) "about its potential acquisition of a stake in the access network company's share capital." Bloomberg reported that, according to unnamed sources familiar with the matter, CEO Franco Bernabe is considering a sale of an initial 30 per cent stake in the new company to CDP after a separation.

Bloomberg also reported that sources close to company have valued the fixed-line assets at about €14 billion ($18.3 billion). In a separate report, Bloomberg further cited sources as saying that Telecom Italia is planning €10 billion in fibre-optic investments for its fixed-network unit over 10 years.

Telecom Italia said it will immediately inform Italy's communications regulator, Agcom, about the plan, and said the authority will assess the plan's impact on the current regulatory framework. Under the current plan, the structure will guarantee all operators access to the fixed-line network, the operator added.

The operator is separately evaluating a possible merger of its mobile unit with Hutchison Whampoa's 3 Italia, and said on May 8 it plans to complete the review in 30 days. It has been speculated that the spin-off of the fixed-line network could help smooth the path towards a merger, but some shareholders, most notably Telefónica, remain sceptical about the benefits of such a deal; Hutchison is also targeting a majority stake in Telecom Italia.

According to Reuters, Telecom Italia COO Marco Patuano said the Hutchison tie-up will be discussed at the next board meeting. Telecom Italia's board is expected to meet next week.

Meanwhile, early reactions to the spin-off plan are starting to emerge. The Wall Street Journal reported that one of the reasons for Telecom Italia to go ahead with the spin-off plan is that it hopes to get in return a relaxation of the current Italian regulatory regime. However, the operator's main competitors consider this condition to be "totally unacceptable," and say Telecom Italia does not enable them to match its retail offers.

"A set of rules exists to avoid that, but they're just not respected," a person familiar with the matter told the Journal. The source added that a further relaxation in the rules would totally destroy competition in the country.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article

Related Articles:
Telecom Italia values fixed network at €13B-€15B; delays spin-off decision
Telecom Italia gives itself 30 days to decide on Hutchison tie-up
Telecom Italia fends off fixed network IPO rumours, as Sawiris mulls Italian comeback
Hutchison/Telecom Italia merger plan fans flames of political opposition
Hutchison wants control in Telecom Italia merger plan, according to reports
Telecom Italia in 'preliminary' merger talks with Hutchison's 3 Italia

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